Vanguard funds are the most beloved offerings in 401(k) plans, and it's not even close. Thirty-three of its funds rank among the 100 most popular funds in employer-sponsored retirement plans in the country, according to information from BrightScope, a financial data firm that rates 401(k) plans.
Many of the best Vanguard funds make this list, but here's what the full breakdown of options looks like:14 are low-cost index funds that track a broad market benchmark (more on those later).10 are Vanguard Target Retirement funds, those one-stop funds for investors who want and need help investing their retirement savings. 9 are actively managed funds, including some of the most iconic offerings in Vanguard's arsenal.
As part of our annual review of the most popular 401(k) funds in the country, we're reviewing both Vanguard's actively managed and target-date funds. We have rated each fund Buy, Sell or Hold, and this year includes some upgrades and even a rare downgrade.
But first, a quick word about Vanguard's index funds. These types of low-cost investments are built to perform in line with a broad index. And Vanguard's "Total" fund suite – Total Stock Market (VTSMX), Total International Stock (VTIAX) and Total Bond Market (VBTLX) – are among the biggest index funds in the country. Generally, these funds do what they're geared to do, and we recommend them fully.
But two index funds on the list require a word of caution, namely Vanguard Growth Index (VIGAX, #48 in the ranking) and Vanguard Value Index (VVIAX, #68). These funds slice the universe of U.S. companies a little finer than Vanguard 500 Index, which holds the 500-odd stocks in the S&P 500-stock index. There's nothing wrong with concentrating on growth or value stocks. But it's worth remembering that these funds can be more volatile than the broad stock market at times, and perform differently (sometimes better, sometimes not) than the broad market, too.
Now, let's look at some of the best Vanguard funds for your 401(k) plan … and weed out a few lesser options, too.SEE MORE The 25 Best Low-Fee Mutual Funds to Buy in 2020 Returns and data are as of Sept. 25, unless otherwise note